Welcome to ‘in a nutshell’
New technologies and businesses are emerging so fast that any young child is likely to have a career in an industry that does not even exist yet!
Quantum computing, autonomous vehicles, artificial intelligence, cryptocurrencies, nanotechnology, blockchain, biometrics, energy storage, carbon management are just some of the nascent industries, although there is every chance that a new one is being developed in a garage or laboratory somewhere as I write this blog.
As investors, we need to not only understand these developments but assess their investment potential too. In this series, we will be walking through some of these shiny, exciting concepts and sharing our views as to which will make money.
Our aim is not to dazzle with science so, if you are an expert in these fields, forgive our simple language. On the other hand, if you want a gentle introduction to Bitcoin, stay tuned…
In a nutshell: artificial intelligence (AI)
What is it?
AI is a computer system that can learn like humans. It does this by inferring relationships between things.
If you want to teach a computer today what a dog is, you need to tell it to look for a furry domesticated animal that barks and chases cats.
For an AI system, you just need to show it thousands (although this will soon be dozens) of dog pictures and videos and it will learn not only the key facts but also how dogs move, what its tail says about its mood and so on. It is this additional, ‘untaught’ information that it picks up and infers that makes it intelligent.
What is it good for?
Assimilating huge amounts of data. We live in a world of data and by applying this smart technology, it can identify patterns or solutions that humans do not have the capacity to process.
This does not just mean Netflix can be smarter in suggesting the next film to watch.
One of the earliest applications was to look at energy usage in data centres which ultimately resulted in 30% lower energy bills. Google, who owns this particular AI, now uses the same system to reduce the battery drain in Android phones and now wants to apply it to the whole of the US electricity grid.
In healthcare, an AI system that analyses millions of lung cancer scans correctly identifies tiny specks of cancer about 95% of the time compared to around 65% for radiologists. For every scan, the system uses a process of ‘reward and punishment’ to get it to push towards 100%.
Is it bad?
In 2014 Elon Musk, CEO of Tesla said, “With artificial intelligence we are summoning the demon”. There are malevolent uses for many things in life and AI is no different. Clearly any evil application could be super-smart and thus super-dangerous, but AI systems will also be used to thwart such attempts in the same way we use computers to counter cyber-attacks today.
Other key criticisms of the systems include biases within the algorithms and the potential loss of jobs.
Does Equilibrium invest in it?
Yes. In our Adventurous and Global Equity funds we hold the Sanlam Artificial Intelligence fund.
Companies can use AI systems to provide smart ways to reduce costs or boost revenues by providing value-add services to customers, both of which feed through directly to higher profits and therefore provide an investment opportunity.
The Sanlam fund invests in both companies that develop and sell the AI systems (US company Globant, for example) and companies that will benefit from applying it to their business such as Dexcom which uses AI in their diabetes management service.
Not only that, but the fund manager himself uses an AI system for research instead of a team of analysts.
Our view is the future is very positive, as AI becomes smarter and is applied to an increasing number of commercial applications, it will become a ‘must-have’ for companies to grow or even maintain competitive positions.